A sharp fall in the value of bitcoins has been attributed to DeepSeek AI, which is also linked to a fall in tech stocks.
This market impact is largely thanks to DeepSeek being perceived as highly disruptive in its ability to operate at lower costs, with much lower power overheads, than OpenAI’s ChatGPT and other generative AI models.
Nvidia stocks dropped by almost 17 per cent following the release of DeepSeek AI’s V3 and open-source R1 AI models. Bitcoin’s drop in value was much less severe, but still saw a fall from highs on January 26 of $84,415 (£67,794) to a low of $78,717 (£63,215) the next day.
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That is roughly a seven per cent drop in value, although bitcoin pricing has since stabilised, currently sitting at around one per cent lower than the January 26 valuation.
While Bitcoin may not be impacted by a cheaper-to-use chatbot in the way Nvidia is, its value was still pulled down following market-wide declines including a three per cent Nasdaq dip.
What is DeepSeek?
The DeepSeek app for iPhone has unseated ChatGPT at the top of the free iPhone apps chart and, with a registered account, can be used much like the ChatGPT app.
Its usefulness goes beyond that, too, as DeepSeek claims the computational power required for its AI calculations is only a fraction of that of its rivals. This, in turn, has led to much lower costs for those wanting to use DeepSeek AI in their own software.
AI companies charge by input and output tokens, the building blocks of information put in and generated, by AI. OpenAI currently charges up to $10 (£8) for one million output tokens, compared to 28 cents for DeepSeek’s chat model (the non-promo price will eventually be $1.10, or 88p), and $2.19 (£1.76) for the company’s more involved AI-reasoning model.
The method used to make DeepSeek’s AI so efficient is explored in a white paper published by the company. Despite its lower energy overheads, the AI’s performance is reportedly comparable with that of models from OpenAI.
With many entities aiming to use AI to reduce business costs, it is no wonder DeepSeek has caused shockwaves across industries, including substantial drops in the stock price of US energy companies.
What’s wrong with DeepSeek?
If the huge energy consumption of AI and its required data centres won’t be as bad as feared, doesn’t this mean DeepSeek is good news?
DeepSeek is a Chinese company and, as such, has been barred from recognising topics considered taboo by the Chinese government. It won’t make comment on Taiwan, Tiananmen Square or Hong King protests, among others, much like other Chinese AI models. Operating within the bounds of Chinese censorship is the norm for their companies.
DeepSeek has also already been the victim of a major cyberattack, leading to concerns on the safety of user data. It temporarily limited user registrations in response.
The company was founded in 2023 in Hangzhou, and is believed to have just a fraction of the employees of OpenAI, although DeepSeek AI’s stratospheric rise means it was not under the spotlight before January 2025.
